In a strategic move to solidify its acquisition of Warner Bros Discovery (WBD), Netflix has revised its $82.7bn (£61.5bn) bid to an all-cash offer. This adjustment is designed to provide greater certainty and expedite the deal's completion, directly challenging a competing hostile bid from Paramount Skydance.
Streamlining the Acquisition Process
Originally, Netflix secured unanimous backing from the WBD board last month with a cash-and-shares proposal valued at $27.75 per share. The shift to an all-cash structure at the same valuation simplifies the transaction, offering WBD stockholders enhanced financial clarity and accelerating the timeline for a shareholder vote, potentially as early as April.
Ted Sarandos, co-chief executive of Netflix, emphasised the benefits of this revised agreement. "Our revised all-cash agreement will enable an expedited timeline to a stockholder vote and provide greater financial certainty at $27.75 per share in cash, plus the value from the planned separation of Discovery Global," he stated. The WBD board continues to endorse the deal, confident it will yield optimal outcomes for stakeholders, consumers, and the entertainment sector.
Key Assets and Regulatory Progress
Upon completion, Netflix would gain control of WBD's prized assets, including Warner Bros Studios, known for franchises like Harry Potter and Batman, and HBO, home to acclaimed series such as Game of Thrones. Investors in WBD will also receive shares in the spun-off global networks operation, encompassing CNN and the Discovery Channel, which Netflix is not acquiring.
Sarandos highlighted ongoing efforts during a recent earnings call, noting that Netflix has initiated regulatory processes and anticipates securing government approval. "We're working really hard to close the acquisition of Warner Bros Studios and HBO, which we see as a strategic accelerant," he remarked.
Paramount's Hostile Counterbid
Paramount Skydance persists with its own $108.4bn cash takeover bid for the entirety of WBD, adopting a hostile approach to sway investors away from the board's agreement with Netflix. Recent actions include plans to nominate directors to WBD's board to oppose the Netflix deal and a lawsuit seeking financial disclosures, though a Delaware court rejected this legal challenge last week.
To succeed in what is termed a proxy fight, Paramount must convince sufficient WBD investors to support its nominees at the annual meeting, typically held in June. Additionally, Paramount intends to propose amendments to WBD's bylaws to require shareholder approval for the spin-off of the global networks business.
Financial Implications and Breakup Fees
Under the terms with Netflix, WBD faces a $2.8bn breakup fee if it withdraws from the agreement. Paramount has matched this with a revised offer including a $5.8bn termination fee. However, WBD estimates that accepting Paramount's deal would incur $4.7bn in costs, covering the Netflix breakup fee, additional debt interest, and penalties for an incomplete debt exchange.
The WBD board has repeatedly advised shareholders to reject Paramount's bid, labelling it inadequate and risky, citing it as the largest leveraged buyout in history.
Netflix's Financial Performance
Amidst these developments, Netflix reported surpassing 325 million subscribers in its latest quarterly earnings, driven by popular shows like Stranger Things. The company projected annual revenue between $50.7bn and $51.7bn for 2026, with the lower end slightly below analyst estimates, leading to a 4.5% share drop in after-hours trading.
